Labour and their economic record Watch

SuperhansFavouriteAlsatian
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#41
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This thread gets the much desired "Dan Grover's Exciting Award"!
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John82
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#42
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(Original post by Drogue)
You realise the rail system costs more money than it did when it was nationalised, and ticket prices have risen above inflation by a huge margin?
I'll have to take your word for it. I stand by my point that tickets are still below market price.

Worldwide, privatisation is a lot older than Thatcher. And it's been shown in natural monopolies it doesn't work, while it does where competition is efficient. Which isn't really a surprise, when you think about it
I've already accepted that natural monopolies aren't ideal for privatisation. I stand by my point that the mass privatisation of the 1980's was unchartered territory for the government.
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President_Ben
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#43
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(Original post by John82)
I'll have to take your word for it. I stand by my point that tickets are still below market price.
Given that things like railways wouldn't be operating if you tried to operate them at market rates (ie. without government subsidy to keep private company shareholders satisfied), this is not an interesting result.

I've already accepted that natural monopolies aren't ideal for privatisation. I stand by my point that the mass privatisation of the 1980's was unchartered territory for the government.
What is a natural monopoly and what isn't - are clear and obvious things. You can get price competition over the supply of phone services/gas/water/electricity - but you can't over railways. Anyone can send you the 'thing down the wire/tap/pipe' but they you can't have price competition on a train system. What we do, turn up to the station and have 7 different people trying to sell us a different kind of ticket each time we wanted to make a journey? :confused:

Worth noting that it's in pricing that competition exists for the consumer, on the production side, privatisation hasn't really happened (BT still own the backbone, the generation/production in utilities is still down by monopoly or near monopoly agents) because the economies of scale are so large, a breakup would be disasterous and no one can compete by building a whole new set of pipes to your home/powerplants/tracks and stations.
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John82
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#44
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(Original post by President_Ben)
Irrelevant strawman.
If I say it's unchartered territory and you claim otherwise without any evidence then it is relevent - it means you have lost the argument. Don't try to dismiss the fact. If the British government had no great experience of privatisation prior to the 1980's then it was unchartered territory.

There's only one base of economic theory. Only in a warped mind is there anything other than that. You can fiddle all kinds of assumptions, but the analytical process that is economics, remains the same.
I'm sure you know what I meant. Nationalisation and privatisation are very different. A flat tax and progressive system are very different. The politicians decide which economic ideas [is that a better word?] to implement.

By making sure crackpot business ventures don't go ahead. Doubt this 'damage' will appear given that Labour have been at work since 97. It's been a while for anything to materialise.
Labour kept Conservative spending plans until 1999. We'll see if there is any damage. An important part of business is the confidence to take risks.

And the price of oil is over $70. Might have something to do with it. Maybe.
If that is the reason then the government have failed by not reducing the tax on fuel (maybe). Many of the job losses have come from the public sector.
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President_Ben
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(Original post by John82)
If I say it's unchartered territory and you claim otherwise without any evidence then it is relevent - it means you have lost the argument. Don't try to dismiss the fact. If the British government had no great experience of privatisation prior to the 1980's then it was unchartered territory.
No, it's a strawman. The effects of privatisation and many others thing 'economic' can be studied through models. Much like in other sciences.

Labour kept Conservative spending plans until 1999. We'll see if there is any damage.
There's a lot more to policy than spending.

An important part of business is the confidence to take risks.
I'd refer you to the thread asking why GM doesn't sell crack.

If that is the reason then the government have failed by not reducing the tax on fuel (maybe). Many of the job losses have come from the public sector.
It is exogenuous. The government can't do **** about it (apart from invading countries for their oil - but that isn't quick or easy).

I mean, a meteor could cream half the planet - but I suppose lowering taxes will help? If it isn't 'in your hands', there's not a lot you can do.

Going into fiscal meltdown (USA style) isn't too hot an idea either.
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John82
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#46
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(Original post by President_Ben)
Given that things like railways wouldn't be operating if you tried to operate them at market rates (ie. without government subsidy to keep private company shareholders satisfied), this is not an interesting result.
It's interesting because if the companies could charge the market price there would be more investment.

What is a natural monopoly and what isn't - are clear and obvious things.

You can get price competition over the supply of phone services/gas/water/electricity - but you can't over railways. Anyone can send you the 'thing down the wire/tap/pipe' but they you can't have price competition on a train system. What we do, turn up to the station and have 7 different people trying to sell us a different kind of ticket each time we wanted to make a journey? :confused:

Worth noting that it's in pricing that competition exists for the consumer, on the production side, privatisation hasn't really happened (BT still own the backbone, the generation/production in utilities is still down by monopoly or near monopoly agents) because the economies of scale are so large, a breakup would be disasterous and no one can compete by building a whole new set of pipes to your home/powerplants/tracks and stations.
So is it really obvious what is a natural monopoly? The examples you gave "phone services/gas/water/electricity" as being ok for price competition all have monopoly characteristics, i.e phone lines, gas pipes, water pipes, resovoirs, powerplants, etc.

I've already accepted that natural monopolies and privatisation aren't ideal.
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John82
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#47
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(Original post by President_Ben)
No, it's a strawman. The effects of privatisation and many others thing 'economic' can be studied through models. Much like in other sciences.
I'm sorry but my point on the mass privatisation of the 1980's being unchartered territory stands. End of.

There's a lot more to policy than spending.
No **** sherlock.

It is exogenuous. The government can't do **** about it (apart from invading countries for their oil - but that isn't quick or easy).
Well they could reduce the tax on fuel (somewhere between 40-80% - can't remember now!) and reducing the tax on fuel could offset the rise in fuel prices. This government probably couldn't afford it but it is possible. Obviously not a long-term solution though.
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President_Ben
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#48
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It's interesting because if the companies could charge the market price there would be more investment.
No, they'd go out of business. They'd never sell a ticket at market price.

So is it really obvious what is a natural monopoly? The examples you gave "phone services/gas/water/electricity" as being ok for price competition all have monopoly characteristics, i.e phone lines, gas pipes, water pipes, resovoirs, powerplants, etc.

I've already accepted that natural monopolies and privatisation aren't ideal.
I know in some really simple models, the entire process of some goods is seen as just 'one thing' - but in reality, it's a chain of things. Breaking up vertical integration and privatising the consumer-facing end (ie. pricing) isn't privatisation in it's 'pure' form. But to do so through the whole industry would either do nothing (apart from lead a sale of assets - which given how governments usually are when it comes to these things - would typically mean too cheap, exception to say 3G phone licenses) or mean private interests will suck your industry dry of anything profitable and then walk away. Government has a duty to ensure water flows, electricity buzzes etc after all and it isn't criminal to run a business badly (usually).

As has been said, what would you do in walking into a train station for competitive pricing to consumers? Have 7 different ticket machines? Auction tickets at variable prices? It wouldn't happen at all. Instead, you get them all doing price-observing oligopoly behaviour. All the ills of monopoly, none of the benefits of competition.

I'm sorry but my point on the mass privatisation of the 1980's being unchartered territory stands. End of.
No, it really. The government has very little recent knowledge of what would happen if you invaded France, but it sure as **** knows it'd be a stupid thing to do!

Well they could reduce the tax on fuel (somewhere between 40-80% - can't remember now!) and reducing the tax on fuel could offset the rise in fuel prices. This government probably couldn't afford it but it is possible. Obviously not a long-term solution though.
That's the kind of thing the USA has done. And it won't end happily. Effectively 'printing money' (to be burnt up rather than say, as has been the case in the UK, spent on infrastructure for the NHS, in education etc.) does lead to inflation/devaluation (some of both in their case) - with big and long doses of it that will have quite heavy readjustment costs as imports go up in price. Means everyone else, off the dollar, will get relatively cheap oil and US goods though.
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arkbar
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#49
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That's what I mean by costing more to the government than it used to. However you have to remember that one of those (the Virgin package) was due to the government's breach of contract, rather than Virgin mismanagement. But the majority were the result of privatisation.
Ah, well in addition to that you have the significantly increased subsidy paid to both rail operators and to NR since privatisation.
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Drogue
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#50
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(Original post by John82)
I'll have to take your word for it. I stand by my point that tickets are still below market price.
They are, due to regulation and state subsidy. Trains are a merit good - they reduce congestion and environmental damage, thus their purely private consumption would be inefficient, as it would not take into account the effects on others of that person taking the train. The market is inefficient when it comes to goods with externalities.

(Original post by John82)
I've already accepted that natural monopolies aren't ideal for privatisation. I stand by my point that the mass privatisation of the 1980's was unchartered territory for the government.
Even though I've shown it's been used in many countries since the 1940s? And that economic theory said "if it's a natural monopoly, don't privatise it", and that the rail network is clearly a natural monopoly (unless you want to lay an entire other network, competition among networks is impossible)?

But by your recogning, the New Deal, pensions reform, high spending on schools and the NHS, the Iraq war and stealth taxes are all also uncharted territory. Does that mean you wouldn't criticise Labour for those policies? In a job as important as running the country, it being uncharted territory is no excuse for being wrong. If it's uncharted territory, get more information until you feel happy that it's the right thing to do. If you are happy, and it goes wrong, then it is your fault. Tony Blair didn't know that Iraq didn't have WMDs, or that the insurgency would require a long term commitment of troops, which is the biggest criticism - he *should* have known. It's an understandable mistake, but when you're playing with nations, even understandable mistakes are unexceptable.
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John82
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#51
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#51
(Original post by President_Ben)
No, they'd go out of business. They'd never sell a ticket at market price.
Absolute nonsense.

Unless I'm really bored I'm unlikely to discuss economics with you again.

Couldn't sell a ticket at market price. :eek:

:rofl:
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Lawz-
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#52
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PB's constant referral to his UNDERGRAD economics degree as evidence that anyone who claims the Conservatives did a HUGE amount to set up the innovation based, leaner, and healthier economy since 1992 is funny, considering there are numerous economic gurus who would argue the opposite.

The fact of the matter is a very simple one: Labour INHERETED a VERY healthy economic situation in 1997. Sorry lefties...
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John82
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#53
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(Original post by Drogue)
Even though I've shown it's been used in many countries since the 1940s? And that economic theory said "if it's a natural monopoly, don't privatise it", and that the rail network is clearly a natural monopoly (unless you want to lay an entire other network, competition among networks is impossible)?
The original claim of it being unchartered territory was in response to someone saying many industries were privatised more cheaply than they should have been. With hindsight, yes we can say they were sold off too cheaply. However, the privatisation hadn't occurred in Britain before the 1980's and many members of the government were worried it wouldn't work at all. It must ahve been pretty exciting for those involved.

Too be honest I don't know why this has become a part of the debate in this thread and it's beginning to bore me. A British government hadn't attempted mass privatisation before.

But by your recogning, the New Deal, pensions reform, high spending on schools and the NHS, the Iraq war and stealth taxes are all also uncharted territory. Does that mean you wouldn't criticise Labour for those policies? In a job as important as running the country, it being uncharted territory is no excuse for being wrong. If it's uncharted territory, get more information until you feel happy that it's the right thing to do. If you are happy, and it goes wrong, then it is your fault. Tony Blair didn't know that Iraq didn't have WMDs, or that the insurgency would require a long term commitment of troops, which is the biggest criticism - he *should* have known. It's an understandable mistake, but when you're playing with nations, even understandable mistakes are unexceptable.
Err, you do what now? Slightly different me thinks.
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Drogue
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#54
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(Original post by Lawz-)
PB's constant referral to his UNDERGRAD economics degree as evidence that anyone who claims the Conservatives did a HUGE amount to set up the innovation based, leaner, and healthier economy since 1992 is funny, considering there are numerous economic gurus who would argue the opposite.
Such as who? PB's simple economic analysis tends to wring true - there is no evidence to show that fiscal policy has a lag longer than a couple of years, meaning policies in 1992 have little effect on the economy in 2006. I'd love to see an empirical argument that says otherwise.

(Original post by Lawz-)
The fact of the matter is a very simple one: Labour INHERETED a VERY healthy economic situation in 1997. Sorry lefties...
They did. But as said, the lag on fiscal policy is at most a few years. The state of the economy now owes far more to policies in the last 5-10 years than it does to anything before.
(Original post by John82)
The original claim of it being unchartered territory was in response to someone saying many industries were privatised more cheaply than they should have been. With hindsight, yes we can say they were sold off too cheaply. However, the privatisation hadn't occurred in Britain before the 1980's and many members of the government were worried it wouldn't work at all. It must ahve been pretty exciting for those involved.

Too be honest I don't know why this has become a part of the debate in this thread and it's beginning to bore me. A British government hadn't attempted mass privatisation before.
True. But the point remains that that's no excuse for getting it so vastly wrong.

(Original post by John82)
Err, you do what now? Slightly different me thinks.
Nothing about what I do, just a simple point, as above. It being uncharted territory, though I argue it wasn't, as it had been done before, doesn't excuse the severe mistakes made, any more than Tony Blair's Iraq war being uncharted territory excuses him from any wrongdoing.
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Drogue
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(Original post by John82)
Absolute nonsense.
You'd pay for a ticket that was twice the price? Most people wouldn't. Tickets are severely subsidised, and for the price, you'd expect a better service. Moreover, subsidies don't damage investment, regulation does. The price isn't regulated down, it's subsidised that way. Investment is happening, but railtrack isn't keeping up (see the Virgin court case on tilting trains).
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President_Ben
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#56
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#56
(Original post by John82)
Absolute nonsense.

Unless I'm really bored I'm unlikely to discuss economics with you again.

Couldn't sell a ticket at market price. :eek:

:rofl:
If there was no subsidy, youe train ticket prices would have to rise to something in order of hundreds per ticket. However, with fewer people travelling, they'd go up even further... you get the picture. It quickly hits a point where people would be nuts to take the train given the alternative modes of transport. The rail network would shut down very quickly.

(Original post by Lawz-)
PB's constant referral to his UNDERGRAD economics degree as evidence that anyone who claims the Conservatives did a HUGE amount to set up the innovation based, leaner, and healthier economy since 1992 is funny, considering there are numerous economic gurus who would argue the opposite.

The fact of the matter is a very simple one: Labour INHERETED a VERY healthy economic situation in 1997. Sorry lefties...
:confused:

The Tories also did some fantastically huge economic cockups since 79.

What have Labour done that has been so wrong? Where has the economic turmoil been? There have been no recessions, yet inflation is low and controlled and unemployment is low and controlled.
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John82
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(Original post by Drogue)
You'd pay for a ticket that was twice the price? Most people wouldn't. Tickets are severely subsidised, and for the price, you'd expect a better service. Moreover, subsidies don't damage investment, regulation does. The price isn't regulated down, it's subsidised that way. Investment is happening, but railtrack isn't keeping up (see the Virgin court case on tilting trains).
The train system is a natural monopoly. If the price doubled there would be some who found other methods of travel. However, the price could rise significantly higher before trains became empty. Ticket prices are regulated to prevent significant increases. If they were not then the price would be higher and the train companies would have more to invest as a result.

Are you seriously saying that the market price for a train ticket would be so high that the trains would be empty? That would make no economic sense.

Am I being played here, or has the world turned upside down?
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Drogue
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(Original post by John82)
The train system is a natural monopoly. If the price doubled there would be some who found other methods of travel. However, the price could rise significantly higher before trains became empty. Ticket prices are regulated to prevent significant increases. If they were not then the price would be higher and the train companies would have more to invest as a result.
Ticket prices are subsidised too, which is why the company is getting far more than the price you're paying for a ticket. Moreover, it being a natural monopoly says absolutely nothing about how many people would switch. Removing regulation would increase profit and investment. Removing subsidisation would do the exact opposite. So if we do both, as let's face it, there's no way a government would be stupid enough to keep subsidising it but remove all regulation on prices, then I'd argue we end up with lower profits for train firms, and less investment.

(Original post by John82)
Are you seriously saying that the market price for a train ticket would be so high that the trains would be empty? That would make no economic sense.
Of course it does! If the price rises a lot, people choose other forms of transport. Because of the abundance of other methods of travel, I reckon demand is quite elastic, so changes in price cause large changes in the quantity used. If the price rose to the market price, the traions would carry far fewer people, making it less economical to run them, the service worse, the price higher, even fewer people using them, etc.

Makes perfect economic sense. Without subsidisation, many industries simply wouldn't exist. Some people may use them still, but far, far fewer, leading to lower profits and lower investment.
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John82
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(Original post by Drogue)
If the price rises a lot, people choose other forms of transport. Because of the abundance of other methods of travel, I reckon demand is quite elastic, so changes in price cause large changes in the quantity used.
Abundance of alternatives?! Like what? Surely the choice is usually between getting the train or driving. The roads aren't much better than the trains. I would say demand is inelastic (nearer being vertical).

If the price rose to the market price, the traions would carry far fewer people, making it less economical to run them, the service worse, the price higher, even fewer people using them, etc.
I'm not sure how the argument shifted to subsidies and I'm not exactly sure who is making these subsidies. My guess is the government? To help the poor with travel?

Can I just confirm if we mean where supply meets demand when we say market price?

You and Ben are talking as if supply is elastic/inelastic* (the horizontal one) and the point about trains being empty implies that the demand curve is below the price dictated by the (horizontal) line of supply. I would say the supply is inelastic/elastic* (the vertical one), i.e. there is only one rail network, there is a limited capacity within each train, there are a limited number of trains that can run.

If I'm right this means the demand curve must (extremely likely anyway) cross the supply curve at some point. If I'm right about there being few alternatives this means demand will be fairly high on the (vertical) line of the supply curve. My assumption is that the current price of tickets is below this equilibrium point and therefore if this price was charged then the train company would create more revenue and thus have more to invest.

So I ask again, has the world turned upside down?!

(Just to add, trains are overcrowded so the price could be raised so that everyone had a seat. Also, I'm mainly referring to rush hour here; it's likely that off-peak travel tickets are above market price.)

* delete as applicable, can't remember which is which.
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Lawz-
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(Original post by Drogue)
Such as who? PB's simple economic analysis tends to wring true - there is no evidence to show that fiscal policy has a lag longer than a couple of years, meaning policies in 1992 have little effect on the economy in 2006. I'd love to see an empirical argument that says otherwise.

They did. But as said, the lag on fiscal policy is at most a few years.
THat's a grossly simplistic view of economic policy and its effects - there are many many economic decisions that have lasting effects decades later...

centuries even...

The retention of the income tax for instance
The transfer of power to the BoE
The floatation of a currency
The return to the gold standard
The profound alteration of a country's economic make-up such as closing loss making industries like mining...

To claim that governmental policy has no reach beyond a "couple of years" into the future... is well... clearly not true.
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